Adjusting Your Plans

November 2, 2010by Hoy Grimm0

If the future was certain, life would be boring. Whether it’s the sudden departure of a controversial college football coach or an early snowfall in the Smoky Mountains, unexpected moments make each day worth living. While we enjoy many of these unexpected blessings each day, we also have our share of undesirable circumstances that cannot be ignored. They push us into decision- making time. 

How do you handle and adapt to the financial and economic surprises that arise? Some investors keep their unopened account statements in a drawer and only give them a passing glance a few times a year. Other investors install finance applications on their smart phones to stay plugged in 24/7. When uncertainty strikes, many investors overreact to the greed and fear swirling in their heads.  How do you filter through the near constant financial chatter on cable and the web to discern what is important and what isn’t? Do you look for the proper response to these situations with calm and reason or do you ignore the problems and hope for the best outcome?

In the book, 7 Habits of Highly Effective People, author Stephen Covey categorizes the events of life as four related quadrants. He first categorizes events as either urgent or not urgent. Then, he further categorizes them as either important or not important. If your doorbell rings, that would be something urgent because it requires your immediate attention, but depending on who is at the door, it may or may not be important. At LeConte Wealth Management, we incorporate Dr. Covey’s time management concepts into our practice, because they help us allocate our time and resources productively. We adapted our work routines around Dr Covey’s structure and committed to spend most of our time on important, not- urgent activities.

Having a prudent system in place to manage your time is the first step in making good decisions. If investors are forced into making a quick decision, they are prone to let their emotions exert undue influence over their decision. Investors who have the freedom to ponder their choices and potential outcomes have a better chance to keep their emotions in check. Having time and taking time to process decisions is critically important to your financial future. Time gives you an opportunity to develop clarity and to assess the real impact that your decision might have on your everyday life. Time gives you an opportunity to pursue an intelligent answer even if you have to look elsewhere for the intelligence.

 If you follow Dr. Coveys time management approach, you should be able to free up time by minimizing the urgent and non-important activities that waste time. Redirect that free time to focus on the important/not-urgent questions in your financial future. Let’s look at a couple of examples.


In October of 2008, after the collapse of Lehman Brothers and the near implosion of the rest of Wall Street, I fielded a call from a concerned client. I could sense the dread in his voice as he spoke, “Well, I guess I am going to change my retirement date. I don’t see how I will be able to retire in six months after what has happened in the markets.” After suppressing a chuckle, I asked him, “When did you think we were going to adapt your portfolio to generate the retirement income that you will need?” It was a rhetorical question so before he tried to answer, I let him off the hook. I explained that we actually started the process three years prior and that we already put a plan into place to generate the first two years worth of his retirement income from maturing bonds and accumulated interest. I told him to relax and focus on how he would stay busy after he retired. Left to his own, our client was willing to wait until the last minute to build an income-producing portfolio. We started working on the problem when it was important, but it wasn’t urgent in 2005. 

Through the persuasive powers of modern-day financial pundits, investors can become convinced that a writer’s predictions somehow will become a certainty. Their logic goes something like this – “Surely if all of the smart people on the radio all share the same forecast it must be accurate”. Gold is the best example of this type of thinking right now. After quadrupling in price in the past five years, a prudent person would exercise caution before buying it now.  But the hubbub of cheery commentary about who is buying it and how much it is going up has become a siren’s song to undisciplined investors. LeConte isn’t necessarily negative on gold’s merits. We are simply being reasonable in our expectations of how it will affect our clients’ portfolios and what its limitations as an investment tool are.

Roth conversion is another example. In 2006, Congress passed The Tax Increase Prevention and Reconciliation Act. A portion of this legislation went into effect in January of 2010 and provides investors with a unique opportunity to convert traditional IRA account assets into Roth IRAs. As a result, investors have been inundated with offers to analyze what is best for them. They are typically provided with complex illustrations that distill a number of assumptions about the future in an effort to predict the right decision. To make matters worse, some of the tax benefits of this legislation expire in December 2010. Investors who waited too long are now faced with an important decision that is becoming more urgent as the end of the year approaches. For our part, we have distilled the decision into very simple terms: investors have an opportunity to convert some of their assets into a unique tax- exempt bucket (the ROTH IRA).Will having a portion of your assets tucked away in a tax- exempt account reduce your risk  to future tax increases? Can you comfortably afford the cost of converting (taxes)? If so, you have your answer. A ROTH IRA, like gold, is simply a financial planning tool with benefits and limitations. These tools work best in conjunction with the broader array of financial tools.

At the end of the day, your financial plans will be effective if they are constructed, monitored and adapted far away from the urgent and immediate needs and headlines of the moment. By focusing on what is important but not necessarily urgent, you can better understand how the individual pieces of your plan work together to address the various risks that may be associated with your family. By hiring LeConte Wealth you can use our knowledge to discern what is important and what is not.

Hoy Grimm

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